Absa helps 376,000 clients
In a sign of a wave of financial distress gripping consumers, Absa has rolled out its debt relief programme to nearly 400,000 consumers and small businesses disrupted by the Covid-19 pandemic. Absa’s programme, which started on April 1, came shortly after SA entered lockdown.
In a sign of the wave of financial distress gripping consumers, Absa has rolled out its debt relief programme to nearly 400,000 consumers and small businesses disrupted by the Covid19 pandemic.
Absa’s programme, which started on April 1, came shortly after SA entered a nationwide lockdown that cut off businesses from their clients, forcing companies to send employees on unpaid leave and the government to come up with measures to provide a soft landing.
The programme, which comprises a debt repayment holiday of three months, has relieved consumers of R5.8bn in scheduled repayments, said Bongiwe Gangeni, the deputy head of Absa retail and business banking, which has 9.7-million clients.
The only condition for receiving relief was that clients had to be in good standing with the bank as at the end of February.
This would allow them to opt in for the debt repayment standstill, with the instalments being added to the end of the repayment term.
“In instances where customers were not up to date as at February 29, they could contact us for a more bespoke solution,” Gangeni said.
Following a big spike in applications after the programme was announced on March 30, volumes have begun to moderate and “we anticipate it will continue falling”, Gangeni said. However, all assumptions were subject to revision in the current environment, she said.
“These are uncharted waters for all of us. There is no question that whether the lockdown ends now or continues, the economy is going to be impacted severely. We are continually looking at scenarios around what plays out in the economy. So we will review the measures we put on the table,” she said.
Absa and rivals Standard Bank, Capitec, Nedbank and FirstRand are in a better position to absorb the costs of payment holidays after the Reserve Bank gave them a temporary pass to dip into their capital buffers, freeing up as much as R320bn.
The government has also come up with other measures, including a programme to pay employees who are losing their salaries and a loan guarantee scheme that would allow small businesses to take out debt, the bulk of which would be guaranteed by the government, at commercial banks.
Gangeni said discussions around the loan guarantee scheme are advanced and ongoing between the banks, represented by the Banking Association SA, the Prudential Authority and the Treasury.
REPAYMENT HOLIDAY
The basic structure is that businesses affected by the pandemic will apply for a designated Covid-19 loan, which can be used only to cover fixed costs such as rent and salaries. Businesses will be able to borrow at the prime interest rate and pay the loan off over 60 months following a six-month debt repayment holiday. The banks will absorb the first 6% of any losses, with the government guaranteeing to cover the balance.
“It is expected there will be no hard security requirements for the loan, but banks may ask for surety where it deems it appropriate. We are hoping to get this going by the end of the week,” Gangeni said.